CBN Signs $2.5bn Currency Swap Agreement with China

Nigeria’s Central Bank of Nigeria (CBN) on Monday announced the execution of a bilateral currency swap agreement with the Peoples Bank of China (PBoC), valued at $2.5 billion.

The Governor of the CBN, Godwin Emefiele, led CBN officials while PBoC Governor,
Dr. Yi Gang, led the Chinese team at the official signing ceremony in Beijing, China, on Friday, April 27 2018, a culmination of over two years of painstaking negotiations by
both Central Banks.

A statement issued by Isaac Okorafor, Ag. Director, Corporate Communications, CBN said the transaction, which is valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5bn, was aimed at providing adequate local currency liquidity to Nigerian and Chinese
industrialists and other businesses thereby reducing the difficulties encountered in the search for third currencies.

Among other benefits, the CBN said the agreement would provide Naira liquidity
to Chinese businesses and provide RMB liquidity to Nigerian businesses respectively, thereby improving the speed, convenience and volume of transactions between the two
countries.

“It will also assist both countries in their foreign exchange reserves management, enhance financial stability and promote broader economic cooperation between the two
countries.

“With the operationalisation of this agreement, it will be easier for most Nigerian manufacturers, especially small and medium enterprises (SMEs) and cottage industries in manufacturing andexport businesses to import raw materials, spare-parts and simple machinery to undertake their businesses by takingadvantage of available RMB liquidity from Nigerian banks without being exposed to the difficulties of seeking other scarce foreign currencies.

“The deal, which is purely an exchange of currencies, will also make it easier for Chinese manufacturers seeking to buy raw materials from Nigeria to obtain enough Naira from banks in China to pay for their imports from Nigeria. Indeed, the deal will protect Nigerian business people from the harsh effects of third currency fluctuations,” the statement said.

According to the CBN, with this, Nigeria becomes the third African country to have such
an agreement in place with the PBoC.

It said both the Nigerian and Chinese officials expressed delight at the conclusion and signing of the agreement and expressed the hope that it would boost mutually beneficial  business transactions between Nigeria and the Peoples Republic of China.